Jennifer Lang Financial Services, LLC.​Smart Money StrategiesWisdom For the Life You Want

As you gear up for retirement, you may have heard of “safe money solutions.” Are they right for you? It’s an important question, especially since retirement planning is more difficult than it's ever been in history.

Past generations could count on company pensions that would pay them every month without fail until they died. But the disappearance of these pensions, coupled with the increase in longevity for retirees, has left many people with more questions than answers.

While Social Security will cover at least some of their expenses, most retirees will have to rely on income from their own investments and savings to make up the difference.

However, what many call a bewildering amount of financial choices in today’s market can leave people feeling frustrated.

According to the Investment Company Institute, nearly 120,000 regulated investment funds are available to retirement savers today. And what about other options? There are more annuities than hedge funds available, which doesn’t even begin to cover the universe of countless other instruments that can be tapped for retirement goals.

All that being said, what if you are looking for some choices that help guard your money and maximize income for retirement? Safe money solutions might be worth a look. And what are they? Generally speaking, a safe money solution:

Provides some protection for your principal.

Might pay out retirement income with higher confidence than, say, an equity position might give.

Offer some growth potential with a guaranteed interest rate or other interest-earning opportunities.

Fixed-type annuities, bonds, and Treasuries are among the asset types that can be called “safe money solutions.” But among all of these, annuities are the only instrument capable of paying out a guaranteed income stream for life.

Annuities as a Safe Money Solution for IncomeOne example speaks powerfully to how annuities can provide permanent streams of monthly income, often at less cost than what other asset classes might give.

Dr. Wade Pfau of the American College for Financial Planning recently showed a comparison of different income-planning approaches. His presentation was at the combined Financial Planning Association (FPA) and Academy of Financial Services 2019 annual conference.

Pfau is the director of the Retirement Income Certified Professional program at the college. He showed how a 65-year old woman who purchases an immediate annuity with a life-only payout for $172,915 would receive $10,000 a year for life at current rates.

Comparatively, the same amount of money invested in savings today would produce about $6,920 per year, assuming 4% annual withdrawals.

Using Annuities or Bonds for Retirement IncomePfau went on to compare the same annuity to a ladder of risk-free zero coupon bonds. A 35-year ladder of bonds that would guarantee $10,000 a year for 35 years would cost $224,872.

So the hypothetical woman in this example could put money in the immediate annuity, then allocate the $52,000 difference in an equity portfolio to guard against inflation.

However, every situation has trade-offs, and this scenario isn't any different.While the annuity pays more, the woman is forfeiting control of most of her money in order to receive the life-only payout. If she were to pass away early, the remaining balance of money in the immediate annuity would go to the insurance company.

What might be some alternatives, then? One answer is to put the money instead into a fixed indexed annuity with a guaranteed income rider. Let's assume that she chose an "income-today" strategy, meaning she started payments to her right away.

This index annuity alternative would also yield $10,000 per year but only cost $165,070 upfront. What's more, it would also allow the woman to retain control of at least some of her money and also possibly leave a legacy for her heirs.​

If she were to invest the above balance into savings and withdraw it at a rate of 4% per year, she would only receive $6,602.80 per year for 25 years.

What Else Can an Annuity Do for You?Fixed and fixed indexed annuities are backed by the insurance carrier's cash reserves on a dollar-for-dollar basis. Most carriers have even more than a dollar in reserve for every dollar of outstanding premium that they issue.

Insurance companies do have ratings given to them by the rating agencies such as Fitch, Moody and Standard & Poor's.

Any carrier with a BBB or B++ rating can be a safe haven for your money. Be sure to check the carrier’s solvency ratio, or the ratio of dollars-and-cents in reserves for each dollar of annuity premium they hold.

Those who have yet to get an A rating will often offer more competitive annuity contracts in order to entice retirees and mature-aged individuals to buy them.

A sound safe money solution for your retirement is going to incorporate at least a few of the following principles:

Protection of principal and all financial gains from the effects of a bear market

Sufficient liquidity

Steady, reliable permanent income

Favorable tax treatment

Guaranteed protection of your "can't afford to lose" income streams

Safe Money Solutions and the Retirement Red ZoneIf you are in the retirement "red zone" (within 10 years of retirement in either direction), make sure that your portfolio is adequately diversified.

The "Rule of 100" (100 minus your age equals the percent of your portfolio you should have in equities) can be a good tool to start with. Keep in mind that it's a back-of-envelope tool and a starting point. The equity portion of a portfolio is also important.

Your financial advisor can help you ensure the equity portion of your portfolio is in in several different segments of the economy and also all of the major cap sizes for mutual funds (i.e. small, medium, and large cap).

You will probably need some diversification in the fixed-income segment of your portfolio as well.

Determine Your Monthly Retirement SpendingThe next step is to figure out your expenses during retirement.

This should include all of the basics, such as healthcare, clothing, rent or mortgage payments (if there is one), taxes, insurance, food and entertainment.

Be sure to also include miscellaneous expenses such as holiday and birthday gifts, unforeseen medical expenses, and car repair and maintenance bills. Long-term care expenses should also be considered here.

This schedule of expenses should probably be projected out for at least 30 years, and inflation should also be taken into account.

Put Your Income Strategy into ActionOnce you know what your retirement expenses will be, you can begin plotting out an income plan that will cover them. The foundation of this plan will most likely be Social Security. Be sure to talk to a Social Security expert before making an election.

If you are planning on taking Social Security at age 62, you can increase your monthly benefit by three-quarters if you wait until age 70.

You may have to work for a few more years than you intended in order to maintain your current lifestyle when you retire. Then again, working until age 70 can provide a triple financial benefit.

Not only can it allow you to defer taking Social Security until you are 70 years old. It also shaves a few years off the timespan that you will have to stretch your savings over.

What's more, you can also beef up your retirement portfolio with additional contributions to your IRAs and/or employer-sponsored retirement plan.

Benefits to DelayingWorking until age 70 may also enable you to pay off more of your debt. A retirement cash-flow plan that doesn't include a mortgage payment will stretch much further and be more forgiving than a plan with one.

Even paying off a car loan will stretch your dollars much further, so the more debt that you can eliminate before retirement, the better.

A Secure Retirement Starts TodayPlanning for retirement in today's world is much different than in times past. But an adequately diversified portfolio that is tailored to your risk tolerance, retirement objectives, and time horizon can go a long way towards providing the income security that you need.

During your working years, you've probably set aside funds in retirement accounts such as IRAs, 401(k)s, or other workplace savings plans, as well as in taxable accounts. Your challenge during retirement is to convert those savings into an ongoing income stream that will provide adequate income throughout your retirement years.

Setting a Withdrawal RateThe retirement lifestyle you can afford will depend not only on your assets and investment choices, but also on how quickly you draw down your retirement portfolio. The annual percentage that you take out of your portfolio, whether from returns or both returns and principal, is known as your withdrawal rate. Figuring out an appropriate initial withdrawal rate is a key issue in retirement planning and presents many challenges.

Why? Take out too much too soon, and you might run out of money in your later years. Take out too little, and you might not enjoy your retirement years as much as you could. Your withdrawal rate is especially important in the early years of your retirement, as it will have a lasting impact on how long your savings last.

One widely used rule of thumb on withdrawal rates for tax-deferred retirement accounts states that withdrawing slightly more than 4% annually from a balanced portfolio of large-cap equities and bonds would provide inflation-adjusted income for at least 30 years.

However, some experts contend that a higher withdrawal rate (closer to 5%) may be possible in the early, active retirement years if later withdrawals grow more slowly than inflation. Others contend that portfolios can last longer by adding asset classes and freezing the withdrawal amount during years of poor performance.

Don't forget that these hypotheses were based on historical data about various types of investments, and past results don't guarantee future performance. There is no standard rule of thumb that works for everyone--your particular withdrawal rate needs to take into account many factors, including, but not limited to, your asset allocation and projected rate of return, annual income targets (accounting for inflation as desired), and investment horizon.

Which Assets Should You Draw from First?You may have assets in accounts that are taxable (e.g., CDs, mutual funds), tax deferred (e.g., traditional IRAs), and tax free (e.g., Roth IRAs). Given a choice, which type of account should you withdraw from first? The answer is--it depends.

For retirees who don't care about leaving an estate to beneficiaries, the answer is simple in theory: withdraw money from taxable accounts first, then tax-deferred accounts, and lastly, tax-free accounts. By using your tax-favored accounts last, and avoiding taxes as long as possible, you'll keep more of your retirement dollars working for you.

For retirees who intend to leave assets to beneficiaries, the analysis is more complicated. You need to coordinate your retirement planning with your estate plan. For example, if you have appreciated or rapidly appreciating assets, it may be more advantageous for you to withdraw from tax-deferred and tax-free accounts first. This is because these accounts will not receive a step-up in basis at your death, as many of your other assets will.

However, this may not always be the best strategy. For example, if you intend to leave your entire estate to your spouse, it may make sense to withdraw from taxable accounts first. This is because spouses are given preferential tax treatment with regard to retirement plans. A surviving spouse can roll over retirement plan funds to his or her own IRA or retirement plan, or, in some cases, may continue the deceased spouse's plan as his or her own. The funds in the plan continue to grow tax deferred, and distributions need not begin until the spouse's own required beginning date.​The bottom line is that this decision is also a complicated one. A financial professional can help you determine the best course based on your individual circumstances.

​Certain Distributions Are RequiredIn practice, your choice of which assets to draw first may, to some extent, be directed by tax rules. You can't keep your money in tax-deferred retirement accounts forever. The law requires you to start taking distributions--called "required minimum distributions" or RMDs--from traditional IRAs by April 1 of the year following the year you turn age 70½, whether you need the money or not. For employer plans, RMDs must begin by April 1 of the year following the year you turn 70½ or, if later, the year you retire. Roth IRAs aren't subject to the lifetime RMD rules. (Beneficiaries of either type of IRA are required to take RMDs after the IRA owner's death.)

If you have more than one IRA, a required distribution is calculated separately for each IRA. These amounts are then added together to determine your RMD for the year. You can withdraw your RMD from any one or more of your IRAs. (Your traditional IRA trustee or custodian must tell you how much you're required to take out each year, or offer to calculate it for you.) For employer retirement plans, your plan will calculate the RMD, and distribute it to you. (If you participate in more than one employer plan, your RMD will be determined separately for each plan.)

It's important to take RMDs into account when contemplating how you'll withdraw money from your savings. Why? If you withdraw less than your RMD, you will pay a penalty tax equal to 50% of the amount you failed to withdraw. The good news: you can always withdraw more than your RMD amount.

Annuity DistributionsIf you've used an annuity for part of your retirement savings, at some point you'll need to consider your options for converting the annuity into income. You can choose to simply withdraw earnings (or earnings and principal) from the annuity. There are several ways of doing this. You can withdraw all of the money in the annuity (both the principal and earnings) in one lump sum. You can also withdraw the money over a period of time through regular or irregular withdrawals. By choosing to make withdrawals from your annuity, you continue to have control over money you have invested in the annuity.

However, if you systematically withdraw the principal and the earnings from the annuity, there is no guarantee that the funds in the annuity will last for your entire lifetime, unless you have separately purchased a rider that provides guaranteed minimum income payments for life (without annuitization).

In general, your withdrawals will be subject to income tax--on an "income-first" basis--to the extent your cash surrender value exceeds your investment in the contract. The taxable portion of your withdrawal may also be subject to a 10% early distribution penalty if you haven't reached age 59½, unless an exception applies.

A second distribution option is called the guaranteed* income (or annuitization) option. If you select this option, your annuity will be "annuitized," which means that the current value of your annuity is converted into a stream of payments. This allows you to receive a guaranteed* income stream from the annuity. The annuity issuer promises to pay you an amount of money on a periodic basis (e.g., monthly, yearly, etc).

If you elect to annuitize, the periodic payments you receive are called annuity payouts. You can elect to receive either a fixed amount for each payment period or a variable amount for each period. You can receive the income stream for your entire lifetime (no matter how long you live), or you can receive the income stream for a specific time period (ten years, for example). You can also elect to receive annuity payouts over your lifetime and the lifetime of another person (called a "joint and survivor annuity").

The amount you receive for each payment period will depend on the cash value of the annuity, how earnings are credited to your account (whether fixed or variable), and the age at which you begin receiving annuity payments. The length of the distribution period will also affect how much you receive. For example, if you are 65 years old and elect to receive annuity payments over your entire lifetime, the amount of each payment you'll receive will be less than if you had elected to receive annuity payouts over five years.

Each annuity payment is part nontaxable return of your investment in the contract and part payment of taxable accumulated earnings (until the investment in the contract is exhausted).​To learn more, visit JenniferLangFinancialServices.com.

Once a corporate giant, General Electric Corporation has found itself in a downward spiral in recent years. The former staple of American business has been working to clear some substantial debt off its books.

One of the company’s latest big moves? To reduce debt by freezing its employee pension assets. This means that benefits will not continue to accrue for its employees, even though they continue to work there.

But while this is obviously better than pension termination, where the pension plan is simply dissolved, it marks the latest casualty in the pension landscape in corporate America.

A Growing TrendThere are many reasons why pensions are becoming increasingly scarce in America.Corporations are feeling the bite to cut expenses to a bare minimum. And not just that. There are also other pressures, from the increased use of 401(k)s and other defined-contribution plans, to lengthening lifespans among retirees.

Of course, the low interest rate environment over the past several years also has made it increasingly difficult. Pension plans have fewer options to find investment choices that provide adequate income and that allow them to meet their fiduciary obligations.Finally, many labor unions are also losing ground in their bids to negotiate retirement benefits for their members.

Research company Willis Towers Watson released an alarming study in 2018. Its findings showed that while 59% of corporate employers offered some sort of defined-benefit plan in 1998, only a mere 16% offered one as of 2017.

Furthermore, 93% of employers who offered a defined-benefit plan in 1998 no longer offered this to new hires in 2017.

More Responsibility for Lifelong Income CertaintyAs pension offerings continue to decline, people are left on their own to find ways to guarantee that they won’t run out of income in retirement. And these days, retirement can easily last for 30 years or longer, depending upon a retiree’s health and other circumstances.

Those who are participating in pension plans that become frozen or are terminated completely will need to crunch some numbers.

Shore Up the Income GapsThe first step is to determine how much they were originally going to receive from their pensions – and the amount of the reduction in benefits.

Then they will need to find a way to cover the difference from either their investments or current earnings. It’s a good time for them to examine all of the other retirement accounts that they have and to see how they are performing.

It’s highly possible that many of them will need to increase their rates of saving for their retirement plans.

Companies that freeze or dissolve pension benefits will frequently try to make up for it by offering additional benefits in their defined-contribution plans. A higher rate of matching contributions is one such possibility.

Plan participants should be sure to take advantage of all matching contributions that their employers offer.

Should You Take a Lump-Sum Option or an Annuity Offer?Those whose pensions are being dissolved usually have two basic choices: 1) take a lump-sum distribution or, 2) purchase an annuity with what is left in their pension plan.

For many pension holders this can be a difficult choice, with many possible pros and cons to consider.

What to do if you face this dilemma? It can be wise to consult with a financial planner to help you examine all of the possibilities that can occur.

Potential Pros and ConsAs you work through both options, here are a handful of potential situations that can unfold with either choice:

Ability to Meet Pension Obligations MattersThe dollar value of any partial payment that you receive from your pension is wholly dependent upon the pension being able to meet its obligations.

If the plan does become insolvent, then the Pension Benefit Guarantee Corporation (PBGC) will step in and take over making the plan’s payments. However, you may not get as much each month as you did before.

If the plan does end up holding together, then you have an excellent defense against the possibility of outliving your income. And your spouse may even be eligible for a survivor benefit in some cases, although their payout will be less than yours was.

How Important is Control of Your Money?If you decide to take the lump-sum distribution and roll it over into an IRA, then you will have more control over your money.

You will have a wider universe of investment and instrument options as potential choices into which you can put your money. Just remember that you will have to start taking mandatory minimum distributions when you turn age 70.5.

But this option also allows you to do some tax planning. Why? Because you can control the amount that you take out of the IRA each year.

If you choose to take the annuity payout, then your taxes will be much more predictable. But you will have little to no control over their taxation.

Potential Impact of Loss RiskA lump-sum distribution that is rolled into an IRA will give you more control over your money. However, you may also be taking considerably more risk with your savings than you would have with preset annuity payments.

And you may end up withdrawing more out of your account than you should in some cases. That could result in your assets running dry at a time in your life when you are physically unable to replace them.

Many retirement savers saw big drops in their retirement account balances back in 2008. Some of them even had to keep working for another 5 to 10 years in order to make up for their losses.

You should consider what could happen to your retirement savings -- and your lifestyle -- if you were to incur that kind of a loss.

What makes sense as a solid retirement for people will vary depending on their different needs. Nevertheless, it's prudent to have some mix of conservative assets or instruments as part of your overall portfolio strategy.

Be Mindful of Rollover Rules for Tax PurposesIf you do choose the lump-sum distribution, make sure that you follow all of the rules that pertain to IRA rollovers.

That way you aren't left with a gigantic tax bill. Best practices generally call for a direct rollover into an IRA instead of having the financial company mail you a check and then depositing that into an IRA.

This will effectively prevent many types of mistakes from occurring, mistakes that could cost you thousands in some cases.

Potential Effects on Inheritances and Health BenefitsA lump-sum distribution can also enable you to leave a legacy for your heirs. That is, if you don’t spend all of the money in your IRA by the time you pass away.

But pension and annuity payments will stop with your death, or your spouse’s death, with nothing more going to your heirs.

Employee health benefits may also stop if you take a lump-sum distribution, which could spell trouble if you aren't old enough for Medicare. Be sure to ask your employer whether the choice that you make will affect your health coverage.

Other Factors to ConsiderIf you are going to lose part or all of your pension, here’s a further list of factors to consider:

How much income will you need each month in retirement?

Be sure to include probable healthcare costs such as medications and regular doctor’s visits.

Don't forget the cost of Medicare and any supplemental plan that you purchase.

How much will your pension pay you?

Do you have any other sources of retirement income, such as Social Security or investment income from an IRA?

How long do you and your spouse realistically expect to live after you have both stopped working?

Do you or your spouse’s families have a history of longevity?

Would a guaranteed monthly payout be sufficient for you to retire on?

If your spouse is entitled to a spousal benefit, would that amount be enough for he or she to live on after you are gone?

What is the net present value (NPV) of the future monthly payments that you will receive? (A financial planner can help you answer this question.)

What do you think about receiving monthly payments versus a lump-sum distribution that you will more control over?

Will you be able to resist the temptation of taking too much out of your account?

Would you like to maximize your money for yourself in retirement or would you rather leave a legacy for your heirs?

These are just some of the questions that you will face when you plan for retirement, regardless of whether your pension is reduced or eliminated or not.

A qualified financial professional can help you to answer many of these questions. Just don’t wait until you stop working before making some of these decisions, as it may be too late by then.

Need Help with Putting Your Retirement and Income Strategy in Order?Whether retirement is 10 months or 10 years away, there are many "what ifs" to work through. If you find yourself worrying about how you can enjoy a secure retirement, don't fret.

Financial professionals stand ready to help you at JenniferLangFinancialServices.com. Surveys show that those who work with a financial professional often report more peace of mind, higher retirement savings, and a better overall sense of wellness.

Connect with someone directly. You can request a personal, no-obligation appointment to discuss your situation, goals, and concerns.

​As an annuity owner, you take comfort in knowing that you have planned for an uninterrupted lifelong retirement income stream. Working alongside other income sources from your nest egg, it will pay out, like clockwork, to fund the retirement you have always imagined.

But have you considered whether your income streams are as "efficient" as possible? Whatever retirement strategy you choose — income and all — needs to be "tax-efficient" to ensure you get the most mileage out of your money.

This is just one more piece in the retirement planning puzzle that each of us must solve. When we don't plan for retirement, we run the risk of underspending or overspending our retirement dollars.

What if underspending doesn’t seem like a problem, but rather like an advantage? Consider what events and opportunities to which you may say “no.” And simply because underspending pressures you to have a scarcity mentality, or when you don’t really know if you can afford them.

Perhaps you might pass on an important family event or skip that overseas vacation you always expected to be a highlight of your retirement years. All because you didn’t have a true picture of your anticipated income compared to your expenses.

Overspending can be a Dangerous Double DipOverspending can lead to even more obvious consequences. Belt tightening when you long ago gave up even wearing belts—and anything else that constricted you or your lifestyle.

But if the bulk of your retirement money is in qualified accounts – or in accounts with a pre-tax advantage for accumulation – undisciplined withdrawals could be a ticking tax time bomb waiting to explode.

For example, if you withdraw money for income in a given year, you won't have that full sum for income. For example, say you need to take $20,000 from your $500,000 traditional IRA to cover your income gap for the year.

Since the $20,000 balance is part of funds that have grown tax-deferred, Uncle Sam will ask for his share.

You will owe taxes on the balance at your top effective rate when you withdraw it. That means you won't have the full $20,000 to use for your yearly cash-flow needs.

Without a set distribution plan, withdrawing money 'willy-nilly' can quickly lead to taxes taking a bigger bite of your income dollars than might be necessary.

How Annuities Can Contribute to Tax EfficiencyHaving the right annuity for your needs can be a strong addition to your retirement portfolio. When it works in tandem with other income vehicles, an annuity can help you plan for greater tax efficiency in a variety of ways:

#1: Tax PredictabilityBy setting up their long-term fixed payouts, annuities don't just offer the benefit of an income stream that is guaranteed, uninterrupted, and doesn't change with market swings. They also offer more tax predictability.

Having these dedicated fixed payments for living expenses, or whatever spending you plan for them to cover, makes your tax bill more measurable. Then your tax bill becomes easier to plan for, on an annual basis and even a long-term basis.

#2: Preventing a Big Tax HitAnnuities can help balance against the risk of cashing out too many funds at once and suffering a big tax hit, as a consequence. This is a real hazard for retirement investors. One in five people who take a lump sum from their retirement plans end up spending all of it in five years, according to a recent study by MetLife.

By setting up a lump sum as a series of payments, you can spread your tax burden out over many years.

#3: Tax DiversificationMost importantly of all, you can change up and diversify your tax mix with non-qualified annuities.

If you put money that you have already paid income taxes on into an immediate annuity, a portion of your monthly payments will be tax-free. This can help reduce your overall tax bill and lower the taxability of your Social Security benefits, as well.

#4: Paired with Other StrategiesBe sure to investigate ways to use other vehicles alongside annuities to lower your tax burden.

With Roth accounts, you take the tax hit on your balance upfront. But if you own the Roth account for a minimum of five years, among other conditions, your money grows tax-free and your withdrawals will be tax-free. This can be a great way to lower your tax bill in retirement.

You may consider guidance from an advisor in weeding through these opportunities. A financial professional can evaluate your unique circumstances, then walk you through multiple options for your unique retirement and income goals.

Then you can seek confirmation of your tax strategy with your CPA so that every member of your professional team is contributing to your retirement success.

Putting More Tax Efficiency into Your Personal StrategyThis quick rundown is just a starting point. There are many avenues for managing your taxes in retirement, and depending on your complete financial picture, only a few may be right for you.

As you explore the use of annuities and other tools for your retirement, consider enlisting help from a financial professional. They deal with money matters every day.

An experienced advisor or agent will also know the unique retirement risks you face. They can help you walk through the universe of potential solutions and help you prepare to retire comfortably.​If you are ready for assistance from a financial professional, guidance is just a click away here at JenniferLangFinancialServices.com. Connect with us directly for an initial appointment.

How To Protect Your Retirement In a Down Market | Free Annuity eBookHave you ever lost money in the Stock Market?Last year we had a pretty good year in the Stock Market. Hopefully it will keep going up.But what happens if it goes down?How much more of your money are you willing to lose?How would that affect your income?

How much would it affect your income if the market dips for another couple of years?If you could lock in your returns and position your money so you could not lose any more money..... but you could reap the potential upside of the stock market..... Would it be worth 40 minutes to sit down and talk about it?

The key to successful retirement planning is developing a plan that while based on your current financial situation, also meets your projected financial goals down the road. Let us help.

What do the Federal Reserve Chairman, President Obama, and The Wall Street Journal have in common?*

They recommend using income annuities as part of a sound financial plan.

In fact, they encourage the use of annuities to reduce the chance of outliving your savings and investments during retirement. Annuities can provide a guaranteed "Paycheck for Life."

If you are retired or preparing to retire, and you are concerned that you might live well into your 90s or beyond, and possibly run out of money, watch this short video to learn how you can arrange a small portion of your current assets to guarantee your income for as long as you live.

How much income do you need in your paycheck?Use our annuities quoter to compare rates.

​Today, Americans bear more financial responsibility for their retirement than ever.The days of receiving monthly pension checks are gradually fading. According to Willis Towers Watson, only 16% of Fortune 500 companies were offering pensions to new hires in 2017, down from 59% of firms in 1998.

Defined-contribution plans like 401(k) accounts are taking their place. And this shift is huge. Now, people must count on them, IRA assets, and personal savings to create income streams that might need to last for a very long time.

How long? Potentially decades. The Society of Actuaries estimates that among married couples who are 65, there is a 72% chance that one spouse will live to 85. Not just that, one of them has a 45% chance of reaching age 90.

In other words, someone may spend as much as one-third of their life in retirement. In the face of that, how do you ensure your nest egg lasts for the rest of your lifetime?

While the answer is different for everyone, a new study offers some fresh insights. The Georgetown University Center for Retirement Initiatives partnered with Willis Towers Watson to explore different ways to generate income in defined-contribution retirement plans.

Their findings show how various lifetime income options, whether as a combination or as stand-alones, can help retirees better enjoy lifelong financial confidence.

A Lack of Retirement Guidance AwaitsAs the study acknowledges, the shift from pensions to self-managed retirement accounts has brought large change for retired and working-age people.

Currently, more than 50% of all global retirement assets sit in 401(k) accounts and other defined-contribution plans, says Willis Towers Watson.

That means “the responsibility for making complex savings and investment decisions” falls to each of us – decisions that “will significantly affect the amount of money available for retirement,” as the Georgetown report notes.

Further compounding the challenges are the risks that come with people living longer. Life expectancy in the U.S. has gone up drastically in the past several decades. That has led to growing national demand for reliable lifelong income streams.

Scrutinizing Different Lifetime Income SolutionsTo help investors make the most of their money and convert savings into reliable lifelong streams of monthly income, the study analyzed six different lifetime income solutions:

An immediate annuity

A laddered bond portfolio

A target date fund using a systematic withdrawal plan

A managed payout fund

A deferred fixed annuity with a target date fund

An investment portfolio in conjunction with a guaranteed minimum withdrawal benefit (also known as an income rider)

Each strategy was tested to see how, when someone retired, a starting asset balance would:1. Generate and protect annual income for retirement.2. Conserve some or all of the starting asset balance.3. Impact the risk of running out of money at any time over a 30-year period.In the third case, the researchers tested each solution’s risk of running out of money in wide-varying conditions. Those ranged from worst-case to best-case scenarios according to market performance and different withdrawal decisions for income.

Securing Lifetime Income for a Comfortable RetirementThe study’s assumptions included:

Having a salary of $80,000 before the investor retired.

Setting a goal of replacing 70% of salary income in retirement.

Having a retirement account balance of $640,000 (i.e., 8x their salary amount).

The analyzed outcomes included:

How much annual income each solution paid out at ages 65 and 85.

The remaining account balance at 85 for each solution.

The potential for running out of income at any point from 65 to 95.

For the goal of 100% income certainty, an immediate annuity would be purchased at age 65 with the $640,000 balance of all retirement savings. This immediate annuity solution was the “benchmark” which all of the other lifetime income solutions were compared against.In the case of the fixed deferred annuity with a target date fund, annuity payouts would start at age 80. The investment portfolio with an annuity providing a guaranteed minimum withdrawal benefit would start at 65.

Which Lifetime Income Solutions Performed Best?Among scenarios that were halfway between worst-case and best-case situations, the study’s findings were:

At age 65, the immediate annuity and the fixed deferred annuity provided the highest initial income of $43,000 per year, as did the systematic spending and the managed payout solutions.

At age 85, the changing market conditions and account withdrawals clearly had an impact on different lifetime income solutions’ performance.

At 85, the immediate annuity, systematic spending solution, and fixed deferred annuity still generated an annual $43,000 payout, outperforming the other three options.

Even so, the lifetime income solution with an annuity guaranteed minimum withdrawal benefit paid out up to $6,000 more than the laddered bond and managed payout options.

The fixed deferred annuity (which also included a target date fund) and the systematic spending solution were at risk of running out of money at any point from ages 65-95.

Keep mind that the deferred annuity solution had the guaranteed income start at 80 -- and depended on the money in the target date fund performing well.

The immediate annuity and the guaranteed minimum withdrawal benefit option weren’t at risk – as weren’t the laddered bond or managed payout options.

Overall, the study findings show that in the uncertainty of how markets and the economy might perform, adding sources of guaranteed lifetime income to a portfolio can beneficial in a few ways.

Not only can they offer dependable income streams that don’t change from month to month. They can also help maximize the amount of monthly income paid out over a decades-long retirement.

Lifetime Income Solutions Better Than NothingSumming up the findings well, the study authors wrote:“The purpose of lifetime income solutions is to convert accumulated savings into a stream of income in retirement… A paradigm shift must occur in the role DC plans play in building and strengthening retirement security. It is time to move away from a myopic focus on wealth accumulation to emphasize generating and protecting lifetime income.”

And it's as the Georgetown University Center for Retirement Initiatives director Angela Antonelli observes. Lifetime income options give retirees more choices and flexibility.

In a column on Forbes.com, she writes how a MetLife study captures the challenges of people self-managing their retirement accounts:

“A recent MetLife study found that one in five individuals who took a lump sum distribution from their retirement plans ended up spending it all in just over five years. That leaves those retirees with nothing more than a Social Security benefit for the rest of their lives — unless they return to work to make ends meet.”

The conclusion? “Workers should seek to implement a lifetime income solution to meet their retirement spending needs,” Antonelli recommends, “rather than taking an ad hoc approach to spending down a nest egg in the golden years.”

Creating More Income Certainty for You in RetirementDo you think that you could enjoy more peace of mind by exploring different lifetime income strategies as part of your retirement plan?

Would you like to explore how these lifetime income options might be able to offer a more worry-free, financially confident lifestyle? Financial professionals at JenniferLangFinancialServices.com can assist you in analyzing your options and seeing if any guaranteed lifetime income options make sense for your situation.

While retirement has many hard-to-predict moving parts, like what your spending might look like, perhaps one of the most difficult questions to answer is this: “How long will you live?”

Thanks to advances in healthcare and technology, people are living longer. According to the Social Security Administration, the statistical average for a 65-year-old man is to age 84. For a 65-year-old woman, it’s 87.

Economists call the possibility of spending decades in retirement a “longevity risk.” Still, keep in mind those numbers are just averages. What someone’s longevity looks like on a personal level will depend on their family history, health status, and lifestyle choices over the years, among other things.

For many people, the uncertainty adds up to financial concern. In one survey, almost two-thirds of surveyed Americans said they worried about running out of money in retirement more than death!However, if you are to have a Retirement Plan that guides you across the Arc of Retirement, you will need some guestimate of how long you might live. That way you don’t underspend or overspend your financial resources.

Here are five steps to help keep longevity risk at bay and tame the uncertainty.

STEP 1: Establish a Benchmark Age for Income Planning​When you reach your 50s, one of the most important steps is planning for how much income you will need in retirement. Not only that, it’s equally important to chart out from where those income streams will come.

Because it’s the endpoint of the retirement timeline for receiving lifelong income, the age you expect to live to is a critical benchmark. Working with your trusted financial professional and your spouse, come up with what we can call a “probable longevity number.”

Some planning software programs use life expectancy in their long-term forecasts for retirement asset growth, income and spending. A more prudent strategy would be to use age benchmarks that go beyond life expectancies. Why?

Going Beyond Life ExpectancyAs statistical averages, life expectancies don’t necessarily capture the full picture. The Social Security Administration observes this in relation to their life expectancy data:

“When you are deciding when to start receiving retirement benefits, one important factor to take into consideration is how long you might live.

According to data we compiled: A man reaching age 65 today can expect to live, on average, until age 84.0. A woman turning age 65 today can expect to live, on average, until age 86.5.

And those are just averages.About one out of every three 65-year-olds today will live past age 90, and about one out of seven will live past age 95.”

What’s more, among people who are married, the odds are high for one of them to live past life expectancy.

According to the Society of Actuaries, there is a 72% chance one of them will live to age 85. What about age 90? There is a 45% probability that one spouse will reach that age. Probabilities for other select ages can be seen in the graph below.​

​By establishing an age benchmark that goes beyond just expected lifespans, your income strategy can benefit from the increased security of this "better-safe-than-sorry" approach. Many financial professionals report using benchmarks that go into mid-to-late 90s, according to this 2016 article by InvestmentNews.

Work with a financial professional to find a prudent, and appropriate, age benchmark that’s right for your income planning timeline.

STEP 2: Set Up Your Baseline 30-Year-Retirement-Plan for 3 ScenariosUsing your “30-Year-Retirment-PLAN” create three retirement income plans for the following longevity scenarios:

1. Living to the “Most Probable Longevity Number” (MPLN)2. Living to 10 years less than the MPLN3. Living 10 years beyond the MPLN

Having these three scenarios mapped out can be beneficial in a number of ways.It can help you structure different timelines for lifelong-held goals and objectives. It gives some backup plans if something doesn't go according to your primary plan. And it helps you visualize, on paper, how spending, income, or other factors can be adjusted if changing circumstances call for it.

Planning for Reliable Lifelong Income CertaintyKeep in mind that annuities are the only private-sector financial products capable of generating a guaranteed lifetime income. For retirees who worry about having enough income each year, here's another helpful guideline to keep in mind: Spend less than you earn every year and save the surplus.There is another strategy that follows the arc of retirement across the decumulation phase. From the “go-go” (60-75), to the “slow-go” (75-90), into the “no-go” (90+) years, reduce your expenses as much as you can each year to mitigate inflation.

This strategy calls for doing this while maintaining an acceptable and comfortable quality-of-life. Besides a "decreasing spending" strategy, there are other possibilities with different kinds of income payouts that you can use to combat inflation.

STEP 4: Test for Sequence RiskRepeat STEP 3 using at least two different “Sequence Risk” scenarios.

What this basically means is that the stock market will go up and down over time. History shows that over the long run (20 years or more), the market generally goes up 9% annually, on average, or more.However, timing is critical. Depending upon when those down-and-recover periods come in relation to your projected retirement period (“Period A” vs “Period B” as examples shown below), sequence risk can have a substantial impact.

​This can have a drastic effect on the overall performance of your retirement financial portfolio – and by extension, your retirement lifestyle. Your financial professional can help you create a strategy that helps guard against this risk.

STEP 5: Rinse and Repeat Your PLANRetirement isn't a set destination, but a moving target.You don’t want to underspend or overspend in retirement. You worked hard to reach this point!So, the best way to stay on track and optimize your finances is to update your PLAN each and every year, based on changing circumstances and the values of your various accounts.

If you work to develop a financial plan like the Step 1-5 Plan outlined above, you will be way ahead of the game!

Prepare for a Financially Confident LifestyleDo you need help in putting your financial and income goals in order? Do you think that your existing retirement plan could use a second look?

If you are ready for personal guidance, we are ready to help you at JenniferLangFinancialServices.com you can request a no-obligation first appointment to discuss your retirement financial picture.

A deferred annuity is one of several investment options you can choose from to fund your IRA. You might think that a deferred annuity isn't suitable as an investment option for an IRA, since both deferred annuities and IRAs generally provide for the deferral of income taxes on earnings until they're withdrawn. However, there are several reasons, aside from tax deferral, that may make a deferred annuity a sound funding choice for your IRA.

Common features of IRAS and deferred annuities

IRAs and deferred annuities share several common features.Both IRAs and deferred annuities:

Provide for the deferral of income taxes on gains (interest, dividends, and earnings) within the account until withdrawn

Offer varying degrees of creditor protection based on particular state law

Are intended as long-term savings options

Subject the account owner to early withdrawal penalties unless an exception applies

Many deferred variable annuities offer a variety of investment options called subaccounts within which you can allocate your premium payments. A variable annuity's subaccount choices will be described in detail in the fund prospectus provided by the issuer. However, you assume all the risk related to subaccount performance, and while you could experience positive growth in the subaccounts, it's also possible that the subaccounts will perform poorly and you may lose money, including principal.

Nevertheless, many variable annuities allow you to reallocate among available subaccounts without cost or restriction. This feature provides you with investment flexibility, because each subaccount is typically based on a different investment strategy. Asset allocation is a method used to help manage investment risk; it does not guarantee a profit or protect against investment loss.

But, the common features shared by deferred annuities and IRAs do not necessarily make them mutually exclusive.

Income

Deferred annuities offer the opportunity to annuitize the account, which involves exchanging the cash value of the deferred annuity for a stream of income payments that can last for the lifetimes of the contract owner and his or her spouse. That can help in retirement by providing a steady, reliable income. But converting your account to an income stream means you're generally locked into those payments unless the annuity provides a commuted benefit option allowing you to "cash out" the balance of your income payments.

Another income option offered by some deferred annuities provides guaranteed* income payments without relinquishing the entire cash value of the annuity. The guaranteed* lifetime withdrawal benefit allows you to receive an annual income for the rest of your life without having to annuitize the annuity's entire cash value.

Some deferred annuities offer a rider that provides you with a minimum income equal to no less than your premium payments less prior withdrawals. With this rider, you are assured of receiving minimum income payments based on the premiums you paid into your annuity, even if the annuity's accumulation value has dipped below your investment in the contract due to poor investment performance.

Principal protection

Deferred annuities may offer protection of your principal. Fixed deferred annuities guarantee* your principal and a minimum rate of interest as declared in the contract when you buy the annuity. However, the interest rate the annuity pays may actually exceed the minimum rate and may last for a certain period of time, such as one year, after which the rate may change.

Deferred variable annuities also may offer principal protection through riders attached to the basic annuity (annuity riders typically come with an additional cost). For example, a common annuity rider restores your annuity's accumulation value to the amount of your total premiums paid if, after a prescribed number of years, the accumulation value is less than the premiums you paid (excluding any withdrawals).

Death benefit

Another benefit offered by some deferred annuities is a death benefit guaranteed* to equal at least your investment in the contract. Most annuity death benefits provide that if you die prior to converting your account to a stream of income payments (annuitization), your annuity beneficiaries will receive an amount equal to your investment in the contract (less any withdrawals you may have taken) or the accumulation value, whichever is greater.

Why an annuity might not be a good idea

Fees: Some deferred annuities charge mortality and expense fees in addition to other fees that may be greater than fees charged in other investments. Specifically, deferred annuities may charge fees for a death benefit, minimum income rider, and principal protection.

Required minimum distributions: As an owner of a traditional IRA, you are required to take required minimum distributions (RMDs) beginning at age 70½. Deferred annuities outside of IRAs do not have this requirement. So buying an annuity within an IRA now adds the RMD requirement to the annuity.

Surrender charges: Deferred annuities come with surrender charges, which charge a penalty for taking withdrawals from the annuity prior to maturity. These surrender charges may make deferred annuities less liquid than some other types of investments. However, many deferred annuities waive surrender charges for withdrawals up to a certain amount, such as 10% of the account value; for RMDs; for withdrawals based on a guaranteed* minimum withdrawal rider; and if the annuity is annuitized into a stream of payments.

Tax deferral: Deferred annuities offer deferral of income taxes on gains and earnings of account values within the annuity. IRAs also offer tax deferral of gains and earnings. So, you are receiving no additional income tax benefit by investing in a deferred annuity through an IRA.

Is an annuity right for you?

Some deferred annuities afford benefits that may not be available in other types of investments, making annuities an option to consider for your IRA. However, most of these benefits come at a cost that can reduce your account value. Before funding your IRA with a deferred annuity, talk to your financial professional. You'll want to know:

Does the annuity have surrender charges and if so, how much are the charges? Is there any amount I can withdraw from the annuity (such as required minimum distributions) without incurring surrender charges?

Can the annuity decrease in value? Are there any options available in the annuity to protect my investment?

What are the benefit options and what are their costs? Are there any other fees or charges that apply to the annuity?

What is the financial strength of the company issuing the annuity?

If annuity benefits fit your financial plan, a deferred annuity may be a good option for your IRA.

Note: Variable annuities are sold by prospectus. Variable annuities contain fees and charges including, but not limited to, mortality and expense risk charges, sales and surrender (early withdrawal) charges, administrative fees, and charges for optional benefits and riders. You should consider the investment objectives, risk, charges, and expenses carefully before investing. The prospectus, which contains this and other information about the variable annuity, can be obtained from the insurance company issuing the variable annuity or from your financial professional. You should read the prospectus carefully before you invest.

*Referring SafeMoney.com Advisor: Jennifer LangIf I could show you a way to stay in control of your money until you take your last breath, but instead of giving that money to the government, nursing home or hospital, you could keep that ​

money in the family for generations to come, at the very least wouldn’t you want to know how to do that?​Learn how to protect your money from unnecessary risks.